Apple has something to prove at developers conference

Chris O'Brien, Los Angeles Times

Chief Executive Tim Cook likes to say Apple Inc. has an advantage over competitors because it does three things well: hardware, software and services.

For much of the year, speculation about new hardware gets the lion's share of attention from obsessive Apple fans. But on Monday, software and services will be in the spotlight as Apple kicks off its weeklong Worldwide Developers Conference in San Francisco.

On the software side, the company is expected to unveil iOS 7, a redesigned version of its mobile operating system. And on the services side, the company is set to announce a new music streaming service, dubbed "iRadio" by Apple watchers, that reflects the broader changes in the way people pay for digital music.

Although analysts say the company doesn't face a make-or-break moment next week, the atmosphere surrounding the annual event will be much different from a year ago, when Apple's stock was on a tear and the company seemed invincible.

Now that growth in sales of its smartphones is slowing, observers say it's more essential that Apple strengthen its software and services to retain customers and find other ways to drive more revenue. It's that loyal following that Google Inc.'s Android developers have not quite managed to match.

"What Apple needs to communicate clearly is their pace of innovation and their ability to bring new experiences to the market is equal to or superior to the Android camp," said Charles Golvin, a Forrester Research analyst.

Apple's stock peaked at $702.10 last September. Since then, its dramatic falloff — shares closed at $441.81 on Friday — combined with the loss of global market share to rival Android's operating system, has caused some anxiety about the company's future among investors.

But for the moment, Apple's perceived challenges don't seem to have shaken the faith of the 5,000 developers who will be in attendance at the five-day conference. In part, that's because although Android has taken the lead in market share, many studies have shown that developers still make far more money designing apps for the iOS platform.

Developers' biggest gripe this year seems to be that tickets for the conference sold out within minutes, leaving many unable to attend.

Tim Burks, an independent iOS developer whose firm Radtastical Inc. is based in Palo Alto, is one of those who got shut out. Although he's disappointed to miss the main conference, he still plans to attend related events and talk to colleagues to get the latest developments.

The first big announcement developers will be waiting to hear is the details of iOS 7. Last year, Cook dismissed the executive in charge of its mobile operating system and put Apple's hardware design guru, Jonathan Ive, in charge.

Ive reportedly has been busy discarding "skeuomorphic" elements, that is, digital elements designed to look like real-world items such as wooden bookshelves or leather casing on the address book. There is also a new, "flatter" look coming that removes some curved and three-dimensional imagery.

"I like the iOS look and feel," Brewer said. "I hope they don't depart too dramatically from it. But some of those skeuomorphic things, that just seems like gratuitous stuff that needs to change."

Developers are also expecting to hear details about how they can more closely integrate features such as the Siri voice assistant, Apple's mobile ads, and a rumored new payment service into their apps.

On the service side, the company appears ready to announce the iRadio streaming service after a week of furious deal-making with record labels. This week, sources confirmed that Apple had agreements with the three big music labels: Universal Music Group, Warner Music Group and Sony Music. The sources were not authorized to speak on the record.

The new service is said to be an ad-based, free streaming music service. It represents a major new step for Apple, which practically invented the digital download market for music.

But in more recent years, as gadgets have gotten more powerful and wireless networks have gotten faster, more users are turning to streaming and subscription services such as Pandora and Spotify, causing growth in sales of downloads to slow.

Apple is coming late to the streaming game, following announcements by Amazon.com Inc. and Google. But both Apple and the music companies are probably hoping iRadio will drive new ad revenue as well as discovery of new music that leads to more downloads.

"Apple is the world's biggest music retailer," said Cary Sherman, chief executive of the Recording Industry Assn. of America. "Combine their downloaded music collection with iRadio and it will be an interesting hybrid that is going to have a big effect on the industry."